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Metals meltdown has ended ... for now

The metals market has finally stopped melting down -- at least for the moment.

After crashing to crisis levels late last year, raw materials that serve as key barometers of global growth are suddenly showing signs of life.

Iron ore has skyrocketed 31% since mid-January, while copper and aluminum -- key construction components -- are up 7% since then.

That's a big relief because the collapse in industrial metals had been setting off global recession alarm bells. The precipitous drops raised fears about just how bad things were in China -- the world's biggest consumer of these materials.

The metals rebound -- coupled with a shaky rally in oil prices -- has helped lift the stock market off the mat. The Dow is now up nearly 1,000 points from its low point two weeks ago. Shares of mining and materials companies like Alcoa(AA) and Freeport-McMoRan(FCX) are up way more on a percentage basis.

"Investors are betting that global demand may remain weak, but won't fall into a recession," Ed Yardeni, president of investment advisory Yardeni Research, wrote in a client note.

The good news is that the metals rebound is real. Since tumbling to 2009 levels in November, the CRB Raw Industrials spot price index, is up 6%. The index consists of a closely-watched basket of materials like copper scrap, tin, zinc and rubber.

"Prices for industrial commodities may finally be bottoming out," Julian Jessop, head of commodities research at Capital Economics, wrote in a client note.

But it's probably premature to conclude the bounce represents an all-clear signal on the global economy. Rather than an uptick in demand, it's more about a drop in supply.

Unlike the deeply divided global oil market, the metals world seems to finally be getting its act together by cutting production to ease a massive supply glut. Some struggling companies, including Freeport, Glencore(GLCNF) and Anglo American(AAUKF), have even been forced to raise cash by launching a fire sale of their coveted mines.

"The materials sector is in the acceptance stage of the grief cycle," said Yardeni. "Companies are scrambling to restructure their operations and debt."

The metals rebound is also a reflection of the overall market's better mood of late. In general, "global risk appetite" has improved in recent weeks, Jessop notes.

Raw materials have also been boosted by a weaker U.S. dollar. After soaring last year, the dollar is down 2% so far this month amid increasing signs the Federal Reserve will have to slow its plans to raise interest rates.

That's good for commodities because most are traded in dollars. When the dollar is super-strong, it saps demand from foreign buyers.

So is the worst truly over for metals? The verdict is still out. Much will depend on how China and other emerging markets perform in the coming months and how quickly producers cut output.

"Given the fickle nature of sentiment in all these markets, we would caution against reading too much into what is still only a brief period of firmer prices," Jessop said.